$910 million and counting: Report warns of rising costs for state tech upgrade

It may be time to recalculate the cost of the most expensive technology project in California state government.

A 12-year-old effort to remake the state’s accounting network is behind schedule and burning up funds it had budgeted for unexpected contingencies, according to independent review by the state Department of Technology.

The report is the second outside study this year that says the $910 million Financial Information System of California – commonly called FI$Cal – likely will come in late and over budget.

In January, the state auditor released an assessment that said FI$Cal was behind schedule. It noted that the project could require an additional year of work and up to an extra $100 million before it’s complete.

Like past audits, the new report raises concerns about a high vacancy rate for the project. When the Technology Department conducted its review, 19 percent of the positions budgeted for FI$Cal were vacant. Today, the vacancy rate is 24 percent because the state budget allocated more positions to the project.

The new review did not suggest a different cost estimate or a revised timeline. It said the project is not “on track to achieve the objectives in the approved timeframe” and is not “on track to achieve the objectives within the approved budget.”

FI$Cal aims to replace dozens of separate, legacy accounting systems used by different government departments with a single program that would provide the state with more a more accurate picture of its finances. It is scheduled to be in full use by 2019.

The main delay centers on connecting FI$Cal to the State Controller’s Office. The controller is a linchpin in the state’s finances. It tracks overall spending and manages the state’s payroll.

The controller’s office was supposed to begin using FI$Cal in July. It missed the deadline, and it’s unclear when the controller’s office will be able to work with the program.

“This is a major milestone missed,” the technology department review says.

Neither FI$Cal nor the Controller’s Office have a sense of when the controller will be able to use the program.

The two departments now have a “war room” to plot a way forward, according to the review from the Technology Department.

“Accuracy and quality are priorities over speed,” said Taryn Kinney, spokeswoman for the State Controller’s Office. “The project continues to gain momentum as more departments are added, and experts know that prudent development, testing, and implementation of the many complex control functions are paramount to the project’s success and cannot be rushed.”

FI$Cal Chief Deputy Director Neeraj Chauhan said the project has recorded several significant accomplishments recently, including developing a help center that is staffed entirely with state employees. That should help FI$Cal contain its spending on outside vendors.

Last month, 25 state departments joined FI$Cal. It was short of the project’s goal for the year, which called for 37 departments to link up to the program.

Next July, 62 departments are scheduled to begin using FI$Cal.

Chauhan said the department is beginning work on a seventh so-called special project report that would update FI$Cal’s projected timeline and cost. The last report, issued in early 2016, raised the project estimated cost from $673 million to $910 million.

The technology department requires new special project reports when FI$Cal’s projected schedule changes by six months or more, or when expected costs rise by $10 million, according to the state auditor.

As of now, “we are still within the $910 million budget for the project,” Chauhan said.